There’s a lot of hyperbole in your post.
Firstly complaining about things happening elsewhere: take it up there, not here. We are not an art site, we don’t control or moderate what happens on those sites. If you have an issue with an actual post made by an actual user (or so-called “bad actor”) here then flag the post: we won’t tolerate the kind of behaviour you describe on these forums.
In regard to copyright not being a useful tool: No, it doesn’t change ownership of the original art, however by agreeing to the T’s and C’s and posting your art on a site you have granted copyright (lit. the right to make copies) to that site and the end user. Most terms do not specify or limit the purpose. Spidering the site and building a dataset would be legal - it’s what all search engines do and has been tested in court. Using that dataset to train a generative engine is just transforming the data. Now, if you could write a prompt that would generate a good facsimile of your own work you’d have a case - but that’s a big if. There would be little point in trying if your art isn’t even in the training data (from what I’ve briefly looked at it really is the best of the best).
I’m not defending it, just pointing out the problems, which is why I mentioned the GDPR as it is very explicity opt-in (unlike the DMCA). If artists are not adequately protected in a country, then that’s an issue to take up with the country’s legislative branch of government.
Regarding plagirism: This is an ethical concern where there are only penalties in an academic environment. Outside that, it’s only illegal if it violates copyright (see above). It’s also rather simplistic to suggest that a generative model can only regurgitate things it has already been shown (it can go beyond that). The same is true of the bulk of human artists and their artwork. Most will turn to reference material or other artists work (prior to image search artists were actively encouraged to build up their own library of reference images), which is what a generative model effectively does.
Regarding the Writer’s Strike: This is a dispute primarily about pay, not AI. The principle concern is that contracts failed to anticipate streaming services so writers don’t get paid for re-runs like they did on broadcast channels. On the flip side, streaming services have allowed the creation of more inventive things that would have been crushed by the medioce state of US TV and Movie making. It will be interesting to see the outcome in regard to AI tools, as obviously they could either help or replace writers. Writers will have to choose which - they likely can’t have AI assistance if they ban AI writing. But the strike itself is a wholy predicatable event, contracts expire, strike, even poorer and/or cancelled shows, contracts re-negotiated, work resumes. The SAG is up next. Meanwhile in other territories work flourishes…
I too am concerned about the applications of AI, and I don’t think it would be wise to replace the kind of artists who can create a good background, or whatever else (writing, programming, world building …) - you don’t get to pick and choose! Each one of those is someone’s passion and/or job. Edit: I find it somewhat ironic that artists have also been trying to use AI to generate code - hint: it sucks donkey balls at RenPy script.
Given the focus here of games though, and encouraging people to make their own, what would you do? Few artists would even consider putting in the commitment and effort without recompense that developers do (and very few developers are also talented artists), so we are left with the choices of AI art, stolen art, a very limited set of public domain pieces, or no/limited art in games.
While the legal questions remain unanswered you’ll have to make your own choices about the ethics of using AI in whatever you choose to do, as will everyone else.